Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
First Community in Focus
Headquartered in Lexington, First Community (FCCO) is a Finance stock that has seen a price change of -11.08% so far this year. The holding company for First Community Bank is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 2.81% compared to the Banks - Southeast industry's yield of 2.59% and the S&P 500's yield of 1.66%.
Looking at dividend growth, the company's current annualized dividend of $0.60 is up 3.4% from last year. In the past five-year period, First Community has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.61%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. First Community's current payout ratio is 33%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FCCO for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.28 per share, with earnings expected to increase 25.97% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FCCO is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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First Community Corporation (FCCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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